Floating exchange rate , or fluctuating exchange rate ( English floating rate of exchange ) - the exchange rate regime in which the value of the currency is allowed to fluctuate depending on the currency market . A currency using a floating exchange rate is known as a floating currency.
Since November 2014, the Russian ruble has been using a floating exchange rate. Previously, the Central Bank of the Russian Federation held the rate within the currency corridor through foreign exchange interventions [1] .
Content
- 1 Business case
- 2 See also
- 3 notes
- 4 References
Business Case
There are economists, for example, Milton Friedman , who believe that in most cases floating exchange rates are preferable to fixed ones. Since the floating exchange rate is automatically regulated, it allows the state to mitigate the impact of shocks and foreign business cycles, and also prevents the emergence of a payment crisis.
However, a fixed exchange rate regime may be preferable in certain situations for its stability and certainty. It may not necessarily be real, taking into account the results of currency trading in other countries trying to keep their currency prices βstrongβ or high in relation to other currencies, for example, in the UK or Southeast Asia before the Asian currency crisis.
There is debate over the preference for choosing between fixed and floating exchange rates set by the Mandell-Fleming Model , which argues that the economy (or government) cannot simultaneously support a fixed exchange rate, free movement of capital and an independent monetary policy. It must choose any two points out of three.
See also
- Exchange rate
- Exchange rate mode
- Impossible Trinity
Notes
- β No exchange. Why do we need the official ruble exchange rate , Rossiyskaya Gazeta - Week No. 6891 (23) (02/03/2016). Date of treatment October 2, 2016.
Links
- FLOATING FOREIGN EXCHANGE RATE // Economics. Dictionary. - M .: "INFRA-M", Publishing house "All World". J. Black. General Edition: Doctor of Economics Osadchaya I.M. 2000.
- Floating exchange rate // Encyclopedic Dictionary of Economics and Law
- Fixed vs Floating Exchange Rates , Kenen, 2000
- Exchange Rate Regimes in the Modern Era: Fixed, Floating, and Flaky , 2011
- The Choice of exchange rate regime , 1996, ISBN 1-85730-029-7
- Exchange rate overshooting and the costs of floating , 2005